facts and figures 2010 english

8/6/2019 Facts and Figures 2010 English

1/112advocacy stewardship collaboration

a report on t he st at e of t he can adian m in in g in du st ry

facts + figures 2010


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The Mining Association of Canada (MAC) isthe national organization of the Canadian miningindustry. It comprises companies engaged inmineral exploration, mining, smelting, refining andsemi-fabrication. Member companies account forthe majority of Canadas output of metals andindustrial materials.

The Associations functions comprise advocacy,stewardship and collaboration: to promote the inter-ests of the industry nationally and internationally, towork with governments on policies affecting minerals,to inform the public and to promote cooperationbetween member firms to solve common problems.

MAC works closely with provincial and territorialmining associations and other industries, as well aswith environmental and community groups acrossCanada and internationally.

Data and SourcesThis annual report reflects currently available data,mostly from 2009, though with some data also from2010 and 2008. A number of statistical differencesoccurred in 2002, reflecting a change from StandardIndustrial Classification (SIC) statistics to the NorthAmerican Industrial Classification System (NAICS).

The value figures are expressed in Canadian dollarsexcept where indicated otherwise.

Author: Paul Stothart, Vice-President, EconomicAffairs, Mining Association of Canada

Editing/Design:gordongroup marketing + communications

Acknowledgement: This document could nothave been prepared without the significant assistanceprovided by Patrick Pearce, Mary Maglaras, Frances

Seguin, and the dedicated staff of the Mineralsand Metals Sector at the Department of NaturalResources Canada (NRCan).

th Mnn aoon o cnd old lk o hnk cmo, cndnZn, Dk Dmond Mn, eKati Dmond Mn, ion O comno cnd, Mnn ind Hmn ro conl, shll cnden, snd cnd Ld., nd X Nkl o h hoohonon o facts & figures 2010.

The Mining Association of Canada

tl o conn

2 Summary of the Mining Industrys Contribution,

Issues and Recommendations

4 1.0 Mining Sector Contribution to the Canadian Economy

6 Contribution to Canadian GDP

9 Industry Impacts in Canadian Provinces and Territories

13 Suppliers to the Mining Industry

14 Taxes and Other Mining Industry Payments to Governments

16 2.0 Production, Processing and Transportation Activity

of the Canadian Mining Industry

16 Production of Key Minerals

25 Mineral Processing

26 Transportation Activities30 3.0 The Money: Reserves, Prices, Financing, Exploration

and Investment

30 Canadian Reserves

30 Global Metal Prices

35 Financing

37 Exploration

41 Capital Investment

44 Investment by Governments in Geoscience

46 4.0 The People: Employment, Costs, Innovation

46 Minerals and Metals Industry Employment

51 Wages and Strikes52 Production Costs

52 Productivity and Technology

58 5.0 The Environment

58 Progress Through the Towards Sustainable Mining Initiative

62 Aboriginal Relations and Impact Benefit Agreements

62 Energy Efficiency and Greenhouse Gas Emissions

66 The Emerging Clean Energy Economy

66 Regulatory Environment

68 6.0 International Market Activities and Developments

68 Foreign Investment Statistics

70 International Trade Statistics

72 International Developments in 2009

82 List of Annexes

108 List of Figures

109 The Canadian Mining Industry at a Glance


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Canadas mining industry is a major driver of

Canadian prosperity, contributing $32 billion toGDP in 2009 and employing 306,000 workers in

mineral extraction, processing and manufactur-

ing. While the industry is important in remote

communities, it also generates prosperity in our

major cities. Toronto, Vancouver, Montreal,

Edmonton, Calgary and Saskatoon all feature

areas of global mining leadership. As well,

there are over 3,200 companies who provide

inputs to the industry, ranging from engineering

services to drilling equipment. The industry

paid around $5.5 billion in taxes and royalties to

federal, provincial and territorial governmentsin 2009down by half from the pre-recession

levels of the previous year, though still a signifi-

cant contribution. The Alberta, Saskatchewan,

Newfoundland and Labrador, New Brunswick,

Manitoba and British Columbia governments

all typically derive a significant portion of their

revenue from the mining industry.

Canada remained the top destination for global

exploration in 2009, attracting 16% of world

spending. The industry accounts for 19% of

Canadian goods exports. A consequence of thisglobal reach is that over half the freight revenues

of Canadas railroads are generated by the

mining industry. Canada also features world-

leading mining finance expertise and mineral

exploration capabilities. There are an estimated

1,000 Canadian exploration companies active inover 100 countries.

The industry places a high priority on corporate

social responsibility (CSR) issues in Canada and

abroad, as reflected by sector initiatives such

as the Mining Association of Canadas (MAC)

Towards Sustainable Mining program, and by

company actions in developing countries such as

helping to pay for schools, roads, electrical grids,

hospitals, clinics, community halls, and child

health and nutrition programs. Global CSR ini-

tiatives are also housed within the UN, the WorldBank, the OECD, the global commercial banks

and many others; Canadas mining companies

are typically leaders in implementing these kinds

of commitments. The Canadian government

unveiled a CSR strategy in 2009, establishing an

extractive sector counselor position among other

components. MAC and the industry believe

that this plan, if properly funded, provides an

effective complement to the numerous industry

measures and strategies already in existence. A

proposed private members bill known as C-300

has laudable objectives but is fundamentallyflawed in its design. A more logical path forward

is to give the governments CSR plan time to work

and to strengthen whatever gaps may emerge.

suMMary Of tHe MiNiNgiNDustrys cONtributiON,issues aND recOMMeNDatiONs

caNaDa

reMaiNeD tHetOp DestiNatiON lbl xl 2009, 16% wl. t 19% c x.


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Increased government support should be provided in the areas of infrastructure and

innovation. Strategic government investment in transportation and power, such as

the Highway 37 power line in BC, can help open new remote and northern regions

for development by improving the economics of dozens of potential projects. As for

innovation, the mining industry invests some $650 million annually in research anddevelopment. Current R&D efforts extend from new exploration technologies, satellite

imaging and new process technologies to continuous marginal improvement in milling

and metallurgical processes, as well as development of new environmental technolo-

gies. The industry feels that the mining and metals sector should be supported in its

innovation efforts to the same degree as other comparable sectors.

A final competitiveness variable, critically important, relates to the efficiency of

Canadas regulatory and project approval processes. Canadas Commissioner of the

Environment and Sustainable Development has noted the numerous government

overlaps and duplications that exist in this area and concluded that there is no evidence

that these burdens generate improved environmental outcomes. Recent amendments

that enable the Canadian Environmental Assessment Agency to initiate and managecomprehensive studies offer hope that unwarranted delays in the review of mining

projects will be reduced and coordination improved. While these amendments are an

important step, more needs to be done to reduce delays and to improve equivalency

and coordination between federal and provincial processes. There is also a need for

government action, clarification and guidance regarding the interrelated issues of

Aboriginal consultation, land use planning, protected areas and revenue sharing.

As an important employer of Aboriginal

Canadians, the mining industry has a largely posi-

tive relationship with the Aboriginal community,

and there is potential to draw upon this source in

greater numbers. Toward this end, the industry

has signed agreements with the Assembly of First

Nations in recent years to further cooperation on

policy initiatives. At the company level, impact

benefit agreements (IBAs) can facilitate progress onextractive and exploration projects while providing

investment in Aboriginal education, training and

jobs. There are an estimated 120 such agreements

in place relating to mineral projects. Aboriginal

communities can play a role in helping industry

meet the broader human resources challenge of

hiring an estimated 10,000 new workers per year

over the coming decade to meet business demand

and replace retiring workers.

Another industry challenge relates to the fact

that there has been a decline in Canadianmineral reserves over the past 25 years in all

major base metals. As well, at the value-added

stage, Canadian smelters and refineries are facing

competitiveness pressure from China and other

low-cost or subsidized regions. Increased govern-

ment spending in geological mapping in recent

years is welcomed, although these increases

should be made permanent given the long-term

need for better data in northern Canada, and the

5:1 spending leverage that is triggered in private

sector exploration. In the federal taxation area,

the phased movement toward a 15% corporateincome tax rate is positive, while the imple-

mentation of an at-depth exploration tax credit

and improved new-mine rules for development

within a defined proximity of current mines

would further enhance Canadas investment

competitiveness.


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The mining and mineral manufacturing sector,

generically known as the mining industry, iscomprised of mineral exploration, mining and

quarry industries, as well as primary metals,

fabricated metal products and non-metallic min-

eral products industries. At its core, the industry

encompasses metal, non-metal and coal mines,

oil-sands mining operations and manufacturing

capacity in the form of smelters, refineries and

fabrication facilities.

The products of this industry help build the high-

ways, electrical and communications networks,

housing, automobiles, consumer electronicsand other products and infrastructure essential

to modern life. These are just a few consumer

applications that rely on mining products:

Batteriesnickel, cadmium, lithium, cobalt

Circuitrygold, copper, aluminum, steel,

lithium, titanium, silver, cobalt, tin, lead, zinc

Computer/TV screenssilicon, boron, lead,

barium, strontium, phosphorus, indium

Cosmetics and jewelleryiron oxide, kaolin,

zinc, titanium, dioxide, gold, diamonds, copper

Electricitycoal, uranium

Eyeglasseslimestone, feldspar, soda ash

Leather clothingborax, chromium, zirco-

nium, aluminum, titanium oxide

Musical instrumentscopper, silver, steel,

nickel, brass, cobalt, copper, iron, aluminum

Sports equipmentgraphite, aluminum,

titanium, calcium carbonate, sulphurSun protectionzinc oxide

Steelnickel, iron ore, zinc for rustproofing

Vehicles and tiressteel, copper, zinc, barium,

graphite, sulphur, bromine, iodine

Wind, solar, hybridsnickel, aluminum,

lithium, gallium, indium, germanium

The mining sector impacts our everyday lives,

and its opportunities, environmental challenges,

investments and needs are inseparable from those

of broader society. As a result of the industrys

innovation and investment activities, Canadahas benefited from low-cost mineral and metal

products, product innovations, good jobs,

greater wealth and responsible stewardship

of natural resources.

The clean energy and environmental technolo-

gies of today and tomorrow also use metals and

minerals as fundamental building blocks. Water

purification systems, for example, rely on nickel

and a host of rare earth elements. Hybrid vehicles

draw energy from nickel hydride batteries.

Catalytic converters require cerium and pal-ladium. Cleaner energy sources, whether nuclear,

solar, wind or hydrogen, all use a range of miner-

als and metals in their equipment and processes.

Efficient lightweight vehicles and aircraft require

aluminum and emerging, still lighter composites

and alloys involving nickel and other metals.

sect ion 1 .0

MiNiNg sectOr

cONtributiON tO tHecaNaDiaN ecONOMy

tHe prODucts

Of tHis iNDustryl bl w,ll wk, ,bl,l l l.


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approximately 4.3% of the national total. By this measure, the extractive industry

is fourteen times larger than the forestry sector and three times larger than the

agricultural sector.

The actual contribution of the mining and mineral manufacturing sector is more

usefully detailed in Figure 2, where the industry is divided into four stages: extraction

of minerals; smelting and refining of these minerals into primary metals; processing

of non-metallic mineral products; and fabrication of primary metal products. The

total output of these four stages amounted to $32.0 billion in 2009. In comparison,

the oil and gas extraction sector contributed $39.0 billion in GDP (although an

estimated $16 billion of this relates to oil sands, some of which could also be

classified under mineral extraction).

Stage I includes the primary mineral extraction and production activities of mining

and concentrating. These can be divided into metal mining, non-metal mining and

coal. Stage I contributed $7.2 billion to Canadas GDP in 2009.

Stage II captures metal production, including the smelting, refining, rolling, extrud-

ing, alloying and casting of primary metals such as copper, nickel, aluminum and

steel. Stage II contributed $9.0 billion to Canadian GDP in 2009.

Contribution to Canadian GDPUntil the global economic recession took hold

in late 2008, the Canadian economy had

experienced a decade-plus of strong growth,

low inflation and low interest rates, with gross

domestic product (GDP) growing at around 3%

annually. The economy passed the trillion-dollar

threshold in 2003 and reached $1.29 trillion

in 2009. Over the past 20 years, the value of

minerals and metals to Canadas economy has

remained in the range of 3.0% to 4.5% of the

countrys GDP.

Figure 1 presents the breakdown of Canadas

gross domestic product. The mining industry in

this table is grouped with oil and gas extraction;

the combined extractive sector contributed

$51.5 billion to Canadas GDP in 2009, or


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Figure 1: Canadas Gross Domestic Product by Industry, 20002009

($ MiLLiONs) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

all 1,026,242 1,040,943 1,068,765 1,091,378 1,124,998 1,158,680 1,191,250 1,222,697 1,230,365 1,195,602

al 18,009 16,204 14,630 16,910 18,716 19,441 19,288 19,343 20,773 19,744

f, 985 1,085 1,118 1,138 1,164 1,119 1,117 1,168 1,248 1,206

f l 5,632 5,676 5,893 5,756 6,142 6,177 5,868 5,218 4,368 3,580

s v l & 4,825 5,274 4,987 5,571 5,883 6,836 7,887 6,709 7,124 5,140

Mnn (inldnMlln), Q ndOl & g exon 51,519 51,236 53,488 54,979 55,672 55,941 57,276 57,940 56,230 51,498

m 188,925 181,084 182,736 181,349 184,814 187,901 184,616 182,297 171,906 151,035

c 51,757 55,542 57,775 59,871 63,453 66,725 69,693 72,414 74,452 69,051

t w 48,921 50,176 50,066 50,270 52,169 55,235 56,977 58,045 58,323 55,839

i ll 34,007 36,498 38,229 38,631 40,813 42,039 44,001 45,211 46,132 45,724

el w, w l 29,050 27,384 28,883 29,057 28,993 30,527 30,172 31,313 31,033 29,634

t, wll 52,519 53,438 55,226 57,767 59,990 63,662 66,798 70,318 70,693 65,978

t, l 52,579 55,234 58,483 60,515 62,666 64,841 69,081 72,808 74,963 74,570

f 60,978 62,802 63,630 64,820 68,212 70,396 75,634 79,332 81,644 81,816

rl l l 121,899 126,782 131,410 134,681 138,631 144,065 147,619 152,772 155,511 159,914

c, b l v 243,367 249,339 256,105 262,549 269,991 276,721 285,639 294,843 302,030 303,763

pbl 57,968 59,705 61,523 63,314 64,085 65,115 67,239 68,714 70,596 72,575

Source: Statistics Canada, National Economic Accounts CANSIM Table 379-0027 and Catalogue No. 15-001-X.


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Economic growth came to a halt during the period from late 2008 to mid-2009 as

the effects of unstable oil prices, unsound mortgages, high consumer and corporate

debt, and ineffective regulation of the financial sector in the United States served

to trigger a global recession. Over the course of 2009, Canadian GDP declined

by 2.5%. Mineral prices fell in most commodities in response to declining global

demand. As discussed in Section 2.0, operations in some 32 Canadian mines were

closed or suspended. Across our economy, business capacity reached its lowest level

in 27 years. The mining industrys decline through the recession is ref lected in

Figure 2, where the industrys contribution to Canadian GDP fell by 20% in 2009.

Economic conditions continued to be slow through the first half of 2009, though

growth resumed through the fourth quarter and the first quarter of 2010. According

Stage III captures non-metallic mineral

processing industries such as abrasives, gypsum,

lime, cement, glass and ceramics. Stage III

contributed $4.7 billion to Canadian GDP in 2009.

Stage IV includes the metal fabrication

industries, such as forging, stamping and heat-

treating activities that produce reinforcing bars,

fabricated wire, cutlery, tools and hardware.

Stage IV contributed $11.1 billion to CanadianGDP in 2009.

Figure 2: Gross Domestic ProductMining and Mineral Manufacturing, 20002009

($ MiLLiONs) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

ml 4,567 4,301 4,113 4,003 3,845 3,837 3,788 3,807 3,801 3,048

n-l 3,057 3,276 3,388 4,091 4,379 4,348 4,050 4,741 4,684 3,472

cl 1,185 1,321 1,057 794 993 1,019 859 944 936 806

tol Mnn 8,825 8,876 8,559 8,856 9,093 9,087 8,651 9,113 9,067 7,188

p l 10,882 10,663 11,087 10,897 11,550 12,095 11,957 11,794 11,840 8,968

fb l 14,201 13,734 14,062 13,711 13,479 13,746 13,984 14,530 13,314 11,126

n-ll l 4,779 4,994 5,096 5,375 5,570 5,820 5,848 5,894 5,618 4,664

tol MnlMnn 29,862 29,391 30,245 29,983 30,599 31,661 31,789 32,218 30,772 24,758

ol x 37,850 37,188 39,943 40,618 40,860 40,531 41,626 42,474 40,600 39,274

pl l 3,056 3,423 3,477 3,477 3,432 3,332 3,179 3,196 3,092 3,043

s v l & 4,825 5,274 4,987 5,571 5,883 6,836 7,887 6,709 7,124 5,140

tol 84,418 84,152 87,211 88,505 89,867 91,447 93,132 93,710 90,655 79,403

Source: Statistics Canada, National Economic Accounts CANSIM Table 379-0027 and Catalogue No. 15-001-X.


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Industry Impacts in Canadian Provinces and TerritoriesThe geographic distribution of Canadian clusters of mining expertise is illustratedin Figure 3 and detailed in Annex 1. The Canadian mining industry continues to be

an economic backbone of Canadas regional and rural economies, creating jobs and

economic growth in more than 115 communities across Canada. As an illustration

of this, it is estimated by SJ Research that the direct, indirect and induced effects

of mining account for 12% of Saskatchewans GDP. As well, approximately 1,200

Aboriginal communities in Canada are located within 200 kilometres of mineral

properties, creating a source of potential economic opportunity.

As of end-2008, there were 961 mining establishments in Canada, including 71

in metals and 890 in non-metals (see Annex 2 for details). The non-metals sector

is dominated by sand and gravel quarries (573), stone quarries (193) and peat mines(70); these tend to be relatively small in size and local in focus. Quebec has the largest

number of metal mines with 24, followed by Ontario with 16 and British Columbia

with 12.

Canadian mineral production (preliminary figure) was valued at $32.2 billion in

2009 (a 30% decline from 2008), of which $6.3 billion was generated in Ontario,

$6.2 billion in Quebec and $5.7 billion in BC (Figure 4). The Saskatchewan share

to Statistics Canada, the utilization of primary

metal manufacturing capacity rose 10% in each

of these quarters, reaching 86%, while utilization

of mining capacity increased around 8% in each

of these quarters, reaching 66%. At the time of

writing, however, there remained some concern

amongst economic analysts regarding the size

of the U.S. fiscal deficit, with debt loads in some

European Union countries and with future

growth rates in China. The possibility of a

double dip recession has not been dismissed.

See Section 3.0 The Money: Reserves, Prices, Financing,Exploration and Investments for more about this issue.

FORT McMURRAY(oil sands,

allied industries)

KITIMAT(aluminum)

KAMLOOPS(copper,

molybdenum, gold)

VANCOUVER(allied industries,

junior exploration/mine financing) TRAIL

(lead, zinc)

ELK VALLEY(coal)

FORTSASKATCHEWAN

(nickel)

SASKATOON/ESTERHAZY(potash, salt)

TIMMINS(zinc, copper,

lead, gold)

SUDBURY(nickel, copper, cobalt,

gold, platinum group metals,allied industries)

MONTREAL(allied industries)

BCANCOUR(aluminum)

THETFORD MINES(chrysotile)

WINDSOR(gypsum)

BATHURST(zinc, lead)

SAGUENAY(aluminum,

niobium)

LABRADOR CITY/SEPT-LES

(iron, aluminum)

VAL-DOR(gold, copper, zinc,allied industries)

ROUYN-NORANDA(copper, allied industries)

THOMPSON(nickel, cobalt)

FLIN FLON(gold, copper, zinc)

ATHABASCA(uranium)

TORONTO(allied industries, senior

exploration/mine financing)

NUNAVUT(gold)

RAGLAN(nickel, copper)

ATTAWAPISKAT(diamonds)

RED LAKE/HEMLO(gold)

YELLOWKNIFE(diamonds)

NORTHWEST TERRITORIES(tungsten)

YUKON(copper, gold, silver)

Figure 3: Canadian Mining Industry Clusters


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positive momentum of this diamond production is in decline. The Newfoundland

and Labrador share has increased over the past decade, as the Vale Inco nickel-

copper mine opened at Voiseys Bay in 2005.

As detailed in Figure 5, Ontario, BC, Quebec and Saskatchewan are also the leading

provinces in terms of mineral exploration expenditures. Canadas three northern

territories together attracted 17% of total Canadian exploration spending in 2009.

While a reduced share from the previous year, this is nonetheless three times their

share of production value and reflects the global interest in Canadas northernmineral potential. Some $6.3 billion was invested in Canadian mine complex devel-

opment in 2009, with Saskatchewan, Ontario, Quebec, the NWT, New Brunswick

and BC each receiving large infusions.

of Canadian production value has grown since

1999, although fell in the past year in line with

reduced market prices of uranium and potash.

The Quebec share has grown significantly over

the past year, reflecting the provinces relative

importance in gold production.

The Northwest Territories share has increased

over the past decade, reflecting the territorysimportance as a diamond producer, although this

share has now levelled off. The fact that explora-

tion spending in the NWT fell from $148 million

in 2008 to $30 million in 2009 indicates that the

Figure 4: Value of Canadian Mineral Production by Region,11999 and 2009p

prOviNce/territOry1999

($ MiLLiONs)1999

(%)1999

raNK2009

p

($ MiLLiONs)2009

p

(%)2009

p

raNK

o 5,120 27.7 1 6,330 19.7 1

Qb 3,657 19.8 2 6,217 19.3 2

B clb 2,445 13.2 3 5,734 17.8 3skw 2,319 12.5 4 5,010 15.6 4

nwl Lb 820 4.4 7 2,290 7.1 5

alb 1,092 5.9 5 2,016 6.3 6

nw t 653 3.5 9 1,510 4.7 7

mb 811 4.4 8 1,321 4.1 8

nw Bwk 851 4.6 6 1,090 3.4 9

nv s 326 1.8 11 380 1.2 10

yk 61 0.3 12 251 0.8 11

p ew il 7 ... 13 3 ... 12nv 349 1.9 10 0 0 13

tol cnd 18,511 100.0 32,152 100.0

p Preliminary ... Amount too small to be expressed1 This table includes the production of coal but excludes the production of petroleum and natural gas.Sources: Natural Resources Canada; Statistics Canada.


13/11211

On a commodity basis (see Annex 3), the top three

jurisdictions for gold production in 2009 were

Ontario, Quebec and BC. The top three copper

producers were BC, Ontario and Manitoba. In both

cases, the three provinces account for 80%90%

of production value. Gold mines were recently

redeveloped for production at the Lamaque and

Fabie Bay mines in Quebec and at the QR mine in

BC. Several gold and copper mines are expected toproceed in BC during the coming years, potentially

including Tasekos Prosperity project, the Copper

Mountain project, Terrane Metals Mt. Milligan

and Teck/NovaGolds Galore Creek projects.

Figure 5: Total Capital Expenditures for Mineral Resource Development by Region, 2009p

prOviNce/territOry eXpLOratiONDepOsit

appraisaLMiNe cOMpLeXDeveLOpMeNt

tOtaLeXpeNDitures

nwl Lb 34,049,126 19,470,909 136,047,957 189,567,992

p ew il

nv s 5,923,818 4,258,000 20,742,844 30,924,662

nw Bwk 9,260,705 750,520 437,266,172 447,277,397

Qb 201,157,841 228,568,172 895,571,244 1,325,297,257

o 338,469,179 131,896,039 895,295,401 1,365,660,619

mb 53,069,631 30,706,558 180,124,762 263,900,951

skw 153,112,877 147,600,282 2,243,048,000 2,543,761,159

alb 5,020,863 6,420,000 194,891,306 206,332,169

B clb 103,837,625 94,185,332 582,354,444 780,377,401

yk 64,586,114 11,873,305 49,000,000 125,459,419

nw t 18,151,057 20,863,021 464,156,268 503,170,346nv 99,429,230 95,460,039 227,687,764 422,577,033

tol cnd 1,086,068,066 792,052,177 6,326,186,162 8,204,306,405

Nil p PreliminaryNote: Includes field work, overhead costs, engineering, economic and pre- or production feasibility studies, environment, and land access costs. Also includes machinery and equipmentand non-residential construction.Source: Natural Resources Canada, based on the Federal-Provincial-Territorial Surv eys of Mineral Exploration, Deposit Appraisal and Mine Complex Development Expenditures.


14/11212

While it is perceived as benefitting primarily rural,

remote and northern communities, the mining

industry also has strong economic ties to major

cities across Canada. Some of Canadas largest

companies are located in urban centres such as

Vancouver (Teck, Goldcorp), Saskatoon (Potash

Corporation, Cameco), Toronto (Xstrata, Vale,

Barrick, Inmet) and Montreal (Alcan, Iron Ore

Company, ArcelorMittal Mines).

Toronto is generally viewed as being the mining

finance capital of the world. It is home to the

Toronto Stock Exchange, more than 400 mining

and exploration company offices, over 30 mining

company head offices and several hundred

mining suppliers, consulting firms and service

providers. The TSX has a worldwide reputation

in financing both mining and mineral explora-

tion activities. As well, Vancouver is the worlds

mining exploration centre; there are some 1,200

Ontario, Manitoba, Quebec and Newfoundland

and Labrador produced all of Canadas nickel.

The opening of the Voiseys Bay mine in

Newfoundland and Labrador in 2006 moved the

province to second place in its first year of nickel

production, although this placement slipped in

the past year. A strike in Sudbury and in Labrador

between Vale and some 3,000 members of the

steelworkers union negatively affected Canadianproduction of nickel during the past year; a

settlement was reached in June 2010, ending

the Sudbury strike after almost 12 months.

Newfoundland and Labrador and Quebec

produced over 99% of Canadas iron ore in 2009,

while the NWT produced 86% of Canadas

diamonds. Iron ore production increases will be

seen in coming years in Quebec, as a half-billion-

dollar investment by Consolidated Thompson will

serve to double the projected iron ore output and

significantly extend the Bloom Lake mines life.

tHe caNaDiaNMiNiNg iNDustry b bkb c l l , jb w

115 c.


15/11213

86 health and safety consultants

26 drilling/blasting contractors and 153

drilling/blasting equipment companies

33 mineral processing contractors and 230

mineral processing equipment companies

76 crusher/conveyor equipment companies

102 laboratory and appliances equipment

companies

114 transportation companies

Ontario (1,329), BC (964), Alberta (547), Quebec

(420), Saskatchewan (106) and Manitoba (82)

have the largest number of mining industry

suppliers, according to Global Infomine. Supplier

companies are important to the introduction and

dissemination of innovative technologies and

ideas to the mining industry.

Section 3.0 details the role of the Canadian

investment services sector as a supplier to the

mining industry. During the past five years,fully 32% of global mining capital and 82%

of financing transactions were handled through

the Toronto Stock Exchange. It is estimated that

several thousand Canadian brokers, analysts,

exchange workers, consultants, trade finance

experts and securities lawyers draw benefit from

the strength of the mining industry.

The Global Infomine data also provide an

interesting comparison of the relative size of the

mining supply sector in leading countries. The

U.S. ranks first with 5,526 suppliers, followedby Canada (3,223), Brazil (2,510), Chile (1,628),

Australia (1,273), UK (969), Peru (957), Argentina

(814), China (581) and South Africa (513).

exploration companies in BC, mostly located

in the greater Vancouver area. Montreal is an

important location for Rio Tinto Alcan and

its world-leading aluminum-related expertise.

The city also hosts significant mining research

and education facilities. The emergence of the

oil sands on a global scale over the past several

years has sparked the growth of Edmonton

and Calgary as hubs of expertise in this area.Similarly, the strong growth in uranium and

potash prices in recent years has highlighted the

importance of Saskatoon as an international

centre of expertise in these segments.

Suppliers to the Mining IndustryThe mining industrys impact extends beyond

its direct GDP contribution. For example, the

industry contributes over half of Canadas rail-

freight revenues and Canadian port tonnage

so organizations such as CN Rail, CP Rail, the

Port of Montreal and the Port of Vancouverdepend on a vibrant Canadian mining industry.

As well, some $3.5 billion in contracts with

northern and Aboriginal suppliers have flowed

from the EKATI diamond mine during its

12 years of operations in the NWT.

Global Infomine, a database analyst, reports

that 3,223 Canadian goods and services firms

provide technical, legal, financial, accounting,

environmental and other expertise to the mining

industry as of 2010, including:

89 geotechnical consulting firms

247 environmental consulting firms

150 exploration consulting firms

155 management and financial firms,

including 57 financial analysis firms

70 education and training organizations and

gLObaL iNfOMiNe, b l,

3,223c v v l,ll, l,,vl x 2010.


16/11214

As shown, the industry (including oil sands mining) paid an estimated $5.4 billion

to federal and provincial/territorial governments in 2009approximately

$2.2 billion in royalties, $1.4 billion in corporate income tax and $1.8 billion in

personal income taxwith around 40% of this amount accruing to the federal

government and 60% to the provincial governments. The provincial share has

increased in recent years, in line with strong growth in royalty payments. In the oil

sands, for example, many projects have repaid investors initial capital spending

and thus have entered a higher royalty bracket. The ENTRANS data suggest that

Alberta, Saskatchewan, Newfoundland and Labrador, New Brunswick, Manitobaand BC all typically derive a significant portion of government revenues from the

mining industry.

Taxes and Other Mining Industry

Payments to GovernmentsFigure 6 provides a summary of payments

accruing to Canadian governments as a result

of mining activitynotably the extraction,

smelting and processing of minerals described

in the first three stages of Figure 2. This table

draws from a consulting study conducted for

the Mining Association of Canada in mid-2010by ENTRANS Policy Research Group, and it

reflects the most recently available data.

Figure 6: Direct Revenues to Governments from the Mineral Sector, 20022009

($ MiLLiONs) 2002 2003 2004 2005 2006 2007 2008 2009

Mnl so exldn Ol snd Mnn

rl/ x 508 471 835 985 982 1,553 3,269 829

c x 1,085 1,049 1,572 1,810 2,858 2,532 2,379 1,389

pl x 1,604 1,585 1,581 1,566 1,589 1,761 1,802 1,493

tol 3,197 3,105 3,988 4,361 5,429 5,846 7,450 3,711

w l 1,951 1,977 2,377 2,405 3,097 2,973 2,819 1,980

w vl 1,247 1,129 1,611 1,956 2,332 2,873 4,631 1,731

39.0 36.3 40.4 44.8 43.0 49.1 62.2 46.6

Mnl so inldn Ol snd Mnn

($ MiLLiONs) 2002 2003 2004 2005 2006 2007 2008 2009

rl/ x 570 586 1,336 1,576 2,545 3,444 5,677 2,161

c x 1,380 1,773 1,943 2,393 4,005 4,213 3,193 1,389

pl x 1,732 1,726 1,730 1,731 1,784 1,970 2,030 1,799

tol 3,682 4,085 5,009 5,700 8,334 9,627 10,900 5,349

w l 2,243 2,605 2,758 2,799 3,707 4,005 3,527 2,190

w vl 1,440 1,480 2,251 2,901 4,627 5,622 7,373 3,159

39.1 36.2 44.9 50.9 55.5 58.4 67.6 59.1

Source: ENTRANS Policy Research Group study for Mining Association of Canada.


17/11215

expenses in underground mines and clarified that the expenses associated with

consulting with Aboriginal and other groups on exploration projects are generally

eligible for CEE/flow-through share treatment. In an age of highly mobile capital,

these actions serve to improve Canadas investment climate.

Among the tax policy areas where continued improvements are needed, the

Canadian mining industry is concerned that federal tax regulations work against

exploration and development spending in proximity of existing mines. Expensesfor new exploration and development at depth (within existing underground work-

ings) are treated less attractively than similar greenfield exploration costs, thereby

reducing the incentive for companies to explore and develop in these expensive

(yet potentially resource-rich) areas. The industry is in discussion with the federal

government on this issue, although progress is constrained by the magnitude of

the federal deficit situation.

As detailed in Figure 6, the level of royalties and

corporate taxes paid in 2009 declined signifi-

cantly from previous years. The global economic

downturn that endured through the first half

of 2009 caused these payments to decrease by

around 50%. A positive interpretation of this is

that the tax system seems to work as it should:

payments decline during a period of recession

and low mineral prices, and increase duringeconomically buoyant periods.

The above figures do not reflect the fourth stage

of activity outlined in Figure 2 (fabricated metal

product manufacturing) as it can be difficult to

determine where to draw a boundary around

the mining industry. Some of the outputs of

this fourth stage, such as cutlery, fixtures and

boilers, likely fall outside the logical bounds.

Including the fourth stage of activity within the

above analysis would mean that the industry paid

an additional amount of around $1.8 billion togovernments in 2009, bringing the mining and

mineral manufacturing industry total to $7.2 bil-

lion. (It is worth noting as well that the oil sands

industry pays large sumsas high as $2 billion

in some yearsto the Alberta government in the

form of land sales payments.)

With respect to federal tax policy, the Canadian

mining industry was pleased with the announce-

ment in October 2007 that the federal corporate

tax rate will decline from the then 21% to 15%

by 2012, a direction that was reconfirmed infederal Budget 2010. The industry was pleased

as well with the continuation of the super

flow-through share provision in Budget 2010,

and with two technical clarifications made by the

Canada Revenue Agency in recent years. The

CRA clarified the treatment of certain tangible


18/11216

sect ion 2 .0

prODuctiON, prOcessiNgaND traNspOrtatiON

activity Of tHe caNaDiaNMiNiNg iNDustry

Canadas strength in mining rests on our ability

to find, produce and process minerals competi-tively and to transport these products to domestic

and international markets efficiently. This is

the base from which the industry can remain

globally competitive and continue to strengthen

its Canadian investments.

Production of Key MineralsCanada is richly endowed with natural

resources. Our major deposits and recent

discoveries are proof of a diversified mineral

potential. Although value declined significantly

in 2009, Canada held its position as a leadingmineral-producing nation with production

value estimated at $32.2 billion.

We rank among the top five countries in the pro-

duction of 12 major minerals and metals. Canada

ranks first globally in production of potash and

uranium; second in nickel and cobalt; third in

titanium, aluminum and platinum-group metals;

and fifth in diamonds, asbestos, zinc, molybdenum

and salt. Canada no longer holds a top-five posi-

tion in the production of gold, silver, copper or

lead. Australia, Russia, the United States, Chinaand Peru are among the other leading supplier

countries (see Annex 4 for more details).

As detailed in Figure 7, Canadian metal produc-

tion values fell to $16.2 billion in 2009, down

28% from the previous years figure, which itself

had declined 14% from 2007. This reflects the

metals price collapse of late 2008. The Canadiannon-metals (industrial minerals) sector has grown

at a steady pace since the mid-1990s and grew

dramatically in 2008, reaching a production value

of $19.4 billion before declining by 40% in 2009.

Potash and diamonds are the largest non-metal

commodities in terms of production value in

2009, while cement is the leading structural mate-

rial. In the mineral fuels area, rising energy prices

have served to increase coal production values in

recent years, and have made possible the opening

of new Canadian coal mines. The Trend mine

and the Brule mine, both in British Columbia,began new production in 2008, while the Donkin

coal mine in Nova Scotia is to be re-opened

in 2010 by Xstrata and is projected to reach

3 million tonnes of coking coal production annu-

ally after an investment of some $350 million.

Of the minerals shown in Figure 8, only

gold, coal and iron ore have shown increased

production value in 2009. A significant decline

in potash production value served to move it

to second rank in 2009, behind coal. The ten

minerals and metals shown in Figure 8 eachhad 2009 production values in excess of

$1.4 billion and cumulatively represent

$25 billion in value79% of the total Canadian

mineral production value. Annex 5 shows that

gold had a strong production value increase

during 2009, while the value of zinc, copper

caNaDa raNKs

first gLObaLLy ; kl bl; , l l-l; , b,z, lb l.


19/112


20/11218

crop yields. Negotiated potash prices for 20092010 are US$550 per tonne in

China and US$750 in Korea and Japanlower than the $1000 levels seen

in 20072008, but four to five times higher than prices of five years earlier.

Saskatchewan remains a world-leading potash region, a position that will likely

be reinforced through the emergence of BHP Billiton as a major player in the

provincethe company is expected to invest some $5 billion in the provincial potash

industry over the coming years. The outcome of an August 2010 proposal from

BHP Billiton to acquire Potash Corporation of Saskatchewan was unclear at the

time of writing, although this development could significantly affect future invest-ment patterns in the potash industry.

Dmond

Canada has presented a particularly interesting story in diamonds over the past

12 years, progressing from zero production value to the worlds third-ranked

diamond producer during this period. Canadian diamonds, mined in the Northwest

Territories, Nunavut and Ontario, account for 13% of global production. Canadian

diamond exports totalled $2.8 billion in 2008, versus zero exports in 1998. These

and nickel declined significantly. The following

subsections discuss market developments

surrounding a few key minerals.

poh

Potash prices and values have followed a turbu-

lent path in recent years and, while prices will

presumably increase over the longer term (driven

by changing diets and agricultural practices inChina and India), these countries will strive to

keep prices in check. New supply from BHP

Billiton and Vale could also serve to dampen

prices. CIBC World Markets has noted that

global grain demand is increasing 2% annually

(largely to feed animals), yet the actual acreage

under cultivation is declining; fertilizer from

potash is bridging this global gap by increasing

1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9P

TOTAL: 18. 5 TOTAL: 19. 8 TOTAL: 19. 6 TOTAL: 19. 9 TOTAL: 20. 1 TOTAL: 24. 4 TOTAL: 28. 0 TOTAL: 34. 2 TOTAL: 40. 6 TOTAL: 47. 0 TOTAL: 32. 2

($

BILLION

S)

0

5

10

15

20

25

30

METALS NON-METALS COAL

Figure 7: Value of Canadian Mineral Production, 19992009p

p PreliminarySources: Natural Resources Canada; Statistics Canada Catalogue No. 26-202 XIB.


21/11219

however, the global industry suffered a setback

as the recession took hold and demand for

luxury goods such as jewellery declined. This

resulted in a drop in demand for rough and

polished diamonds and a 40%50% drop in

average rough prices, as well as in temporary

mine shutdowns during 2009 for most leading

diamond-producing countries, including in

Canada at Snap Lake and Diavik.

On a positive note, the Snap Lake and Victor

projects have entered into full production, which

marks the culmination of a 40-year Canadian

diamond exploration and development effort

for De Beers. Future diamond potential may

also exist in the northern territories and in

Saskatchewan, where the Fort la Corne project

exports are primarily sold to Antwerp and

London for further processing, although some

processing is conducted in the NWT. Some 10%

of the diamonds from De Beers Victor Mine,

which came into production in Ontario in 2008,

will be cut and polished locally, including at a

new facility, Crossworks Manufacturing, located

in Sudbury.

From 1998 to 2004, the Diavik and EKATI

mines produced $6 billion worth of high-quality

diamonds. The Diavik mine reached full produc-

tion in 2004, producing 7 to 8 million carats per

year. The first half of 2008 saw strong growth in

Canadian production, with the opening of two

new De Beers mines, Snap Lake in the NWT

and Victor in northern Ontario. By year-end,

Over tHe LONgterM, albl j 1.3 llbl 4.7 ll 2025

6.3 ll b2035, l- w l .

Figure 8: Canadas Top 10 Minerals by Value of Production, 1999 and 2009

1999 2009

uNit OfMeasure

QuaNtity(MiLLiONs)

$ vaLue(MiLLiONs)

QuaNtity(MiLLiONs)

$ vaLue(MiLLiONs)

cl 72 1,474 63 4,544

p (K20) 8 1,634 4 3,380

gl 158 2,099 96 3,365

i 34 1,304 32 3,174

c k 582 1,366 480 2,775

nkl k 177 1,592 132 2,239

d 2 606 11 1,684

s vl 243 961 216 1,487

c 13 1,231 11 1,441

u k 10 526 10 1,392

Note: Data include shipments by producers regardless of their industrial classification.Sources: Natural Resources Canada; Statistics Canada Catalogue No. 26-202-X.


22/11220

programs. This trend is reinforced by concern over air pollution and greenhouse

gas emissions associated with fossil-fuel combustion.

The value of uranium produced in Canada increased by 82% in 2005, by 26%

in 2006 and by 76% in 2007, reflecting the strengthened global price and supply/

demand situation. However, the value of production declined by 60% in 2008,

reflecting a fall in uranium prices. Canadian production value will increase by an

estimated 50% in 2009 as prices have rebounded somewhat.

The medium- and long-term direction for nuclear energy and uranium demand

remains positive. It is estimated by Ux Consulting that 100 new reactors could be

built worldwide over the coming two to three decades, including an estimated 41

reactors in 25 new countries. China envisions a six-fold increase in its nuclear energy

capacity to 50 GW by 2020, while Russia projects adding 23 GW of nuclear power

annually to 2030. In the U.S., some 38 reactors have recently been granted licence

extensions and 15 new reactors are anticipated by 2015.

is among the largest kimberlite fields in the

world. The Stornoway Renard project in Quebec

has continued to show progress during the past

year. Another interesting development is that

China became the top importer of polished

diamonds from Antwerp through the first

quarter of 2010, surpassing the U.S. China and

India will become the dominant forces in global

diamond demand over the coming years asthe population of middle-class consumers

increases dramatically.

unm

Global demand for uranium has increased con-

siderably in recent years, as countries embark on

new nuclear energy programs or expand existing


23/11221

caNaDastraNspOrtatiON

systeM ll l lw k c b.

revenues, among other impacts. Some 1.2 million

barrels a day of future projects were deferred.

However, growth and investment returned to the

region and sector through mid-2009, as oil prices

rebounded to $70. Prices remain in this range as

of mid-2010.

Imperial Oil announced in mid-2009 that it

was proceeding with the first phase of the Kearloil sands project, a surface mining operation

northeast of Fort McMurray. This phase is

projected to cost $8 billion and produce 110,000

barrels per day by 2012, with plans for continued

growth beyond these figures.

The merger of Suncor and Petro-Canada,

announced in March 2009 and completed in

August, establishes Canadas largest oil company

and significantly impacts the oil sands scene,

creating efficiencies and accelerating particular

projects such as the delayed Fort Hills project.Suncor reaffirmed its core commitment to the oil

sands in June 2010, after announcing plans to sell

conventional holdings in the North Sea and the

Netherlands.

Over the long term, Albertas oil sands produc-

tion is projected to increase from around 1.3

million barrels per day at present to 4.7 million

in 2025. A more recent study by HIS Energy

Research Associates projects that output could

reach 6.3 million barrels by 2035, depending

on long-term economic growth and oil priceperformance. Prior to the late 2008 downturn in

oil prices, it was projected that around $100 bil-

lion in oil sands investment would be made over

the coming 15 years, an estimated 40% of which

was for mining projects and 60% for in-situ.

The exact timetable and investment amounts

The McArthur River uranium mine in northern

Saskatchewan is the worlds largest and highest-

grade deposit, with an average ore grade of 21%

and annual production of around 8,200 tonnes

of uranium oxide. However, production levels in

Kazakhstan and Africa are projected to increase

over the coming decades. In June 2009, Uranium

One announced its purchase of a 50% share of

the Karatau uranium mine in Kazakhstan, whichis expected to triple production over the next four

years. Arevas large Imouraren uranium mine

in Niger is scheduled for commissioning in 2010

and full production in 2012.

Ol snd

The development of the western oil sands

constitutes one of the worlds most sig-

nificant economic stories of the past decade.

Technological advances and increases in crude

oil prices from $20 per barrel in the 1990s to

$70 in 2007 and to $140 in mid-2008 togetherreinforced the oil sands economic viability and

sustained its production growth from test-well

quantities to volumes exceeding one million

barrels per day. Oil sands development increased

wealth and economic activity in western Canada

during the past decade, creating 200,000 jobs

that helped to offset job losses in Canadas

manufacturing sector. Fort McMurray in Alberta,

the hub of oil sands activity, has grown from a

population of 6,000 in 1968 to around 80,000

in 2008.

Given that oil sands operating costs are around

$40$50 per barrel, the significant oil price

reductions of late 2008falling from $140 to the

$40 per barrel rangecaused many companies

to delay or shelve expansion projects and contrib-

uted to job loss and diminished government


24/11222

Figure 9: Production of Synthetic Crude Oil by Quantity and Value, 19982008

syNtHeticcruDe OiL

(000s Of M3)

tOtaL cruDeOiL aND

eQuivaLeNts

syNtHeticcruDe as

% Of tOtaL

syNtHeticcruDe OiL

($000)

tOtaL cruDeOiL aND

eQuivaLeNts($000)

syNtHeticcruDe as

% Of tOtaL

al

1998 17,870.8 94,676.2 18.9 2,313,518 9,734,475 23.8

1999 18,766.9 89,065.5 21.1 3,252,547 13,727,829 23.7

2000 18,608.0 89,136.1 20.9 5,188,916 21,687,681 23.9

2001 20,260.6 89,364.5 22.7 4,995,003 17,734,825 28.2

2002 25,494.6 89,885.1 28.4 6,455,743 19,778,759 32.6

2003 25,028.8 95,311.4 26.3 6,777,342 22,187,602 30.5

2004 26,661.9 101,007.0 26.4 8,570,468 27,767,704 30.9

2005 21,932.5 98,878.7 22.2 9,213,624 33,282,754 27.7

2006 28,764.2

106,017.8

27.1

14,831,145 38,498,843 38.5

2007 39,900.2

108,853.3

36.7

18,012,945

42,130,415

42.8

2008 38,020.7 108,322.4 35.1 25,214,415 62,941,690 40.1

cnd

1998 17,870.8 128,400.3 13.9 2,313,518 12,940,149 17.9

1999 18,766.9 122,287.0 15.3 3,252,547 18,698,282 17.4

2000 18,608.0 127,769.2 14.6 5,188,916 30,523,595 17.0

2001 20,260.7 128,951.0 15.7 4,995,003 24,911,953 20.1

2002 25,494.6 136,969.8 18.6 6,455,743 29,956,080 21.6

2003 25,028.8 144,813.2 17.3 6,777,342 33,610,498 20.2

2004 26,661.9 149,159.6 17.9 8,570,468 40,639,940 21.1

2005 21,932.5 146,207.9 15.0 9,213,624 49,159,801 18.7

2006 28,764.2

161,434.0 17.8

14,831,145 63,649,683 23.3

2007 39,900.2 160,448.3 24.9 18,012,945 62,919,592 28.6

2008 38,020.7 158,950.4 23.9 25,214,415 91,757,005 27.5

r RevisedSource: Statistics Canada


25/11223

reserves. According to the Alberta Energy Department, the lease agreements in

place cover only some 20% of potential oil sands areas. It is also worth noting that

Cenovus received approval in July 2010 to build an in-situ test well in a new area:

the untapped bitumen deposits in the 100-billion barrel Grand Rapids region.

Until the recent recession, it was felt that labour cost and availability issues could

serve to curtail investment in the oil sands, as the cost of equipment, labour and

supplies had increased considerably and availability had tightened. Post-recession,

these variables are felt to be on a sounder footing.

As discussed in Section 5.0, environmental issues surrounding oil sands development

are receiving increased public and political attention. For example, some NGOs

and politicians in the U.S. have argued that carbon-intensive fuels and imports such

as oil from oil sands should be disadvantaged for environmental reasons. The fact

that a shift toward greater in-situ treatment of bitumen could reduce one environ-

mental concern (tailings volumes) while increasing another (energy requirements and

GHG emissions) illustrates the scale of this challenge. The ability to manage these

issues will affect the pace of future development, although it should be noted that all

forms of energy generation carry environmental consequences and that it would be

difficult to enact trade barriers against oil sands production without inviting retalia-

tion. For example, as shown in Figure 32, there are some 30 U.S. states that have anequivalent or greater coal-related GHG challenge than that faced by Canadas oil

sands operations.

have been adjusted in recent announcements,

although the overall amounts and timelines

may prove over time to be close to these figures.

This investment is reflected in several oil sands

operations beyond the aforementioned, includ-

ing Suncors Voyageur project, Syncrude, Shell

Albian Sands and Canadian Natural Resources

Horizon project.

Most oil sands output is exported to the U.S.,

although future customers may include Asian

countries, assuming environmental and related

challenges could be overcome. Enbridge has

proposed a dual pipeline between Edmonton

and coastal facilities in Kitimat, BC that could

open up Asian market potential and move a

projected half-million barrels per day to Asian

markets. There have been noteworthy invest-

ments by Chinese entities in the oil sands during

the past yearincluding a $5 billion investment

in Syncrudeand more are anticipated in thecoming years.

As detailed in Figure 9, synthetic crude oil

accounted for around 24% of Canadas crude-oil

production volume (28% by value) in 2008, up

from 14% a decade earlier. The absolute value of

this production increase is considerable. Canada

produced $2.3 billion in synthetic crude in 1998

and $25.2 billion in 2008. All of this production

is from Alberta, although Saskatchewan also

holds reserves that are attracting interest.

There remains considerable room for expansion

of oil sands development in the medium and

longer term. Albertas oil sands deposits are

estimated to contain 2.5 trillion barrels of bitu-

men that, using existing technologies, would yield

300 billion barrelslarger than Saudi Arabias


26/11224

Figure 10: Non-Ferrous Smelters and Refineries, 20091

OwNer OperatiON type Of faciLity LOcatiON Outputs

N bnk

X Z c (Bwk) Bwk (s.) Bll pb, B, pm

Q

al i. B-c (s.) B-c al

al i. dbl (s.) dbl al

al i./r t al i. B (s.) B al

nwl i f s-c (r.), (s. s.) s-c rl pb

r t al i. al (s.) al al

r t al i. av (s.) av al

r t al i. B (s.) B al

r t al i. g-B (s.) g-B al

r t al i. L (s.) L al

r t al i. sw (s.) sw al

r t al i. (Vl) Vl (r.) Jq al

r t al i./al a mll Qb/h al ../s l

Qb/mb Qb i. (al) al (s.) s-l alX c c (ccr) ccr (r.) ml-e c, a, a, s, t, n, pgm

X c c (h) h (s.) n c, pm

X Z c(gl sl c c)

gl slc c (s. s.) L rl pb

X Z c/n i f(c ell Z L ceZ)

c ellZ L (ceZ) (r.) Vlll Z, c, s*

Ono

c c fl sv dv (c. f.) p h u

c c fl sv dv (r.) Bl rv u

J m L B (s.), (r.) B a, a, rl pb

rl c m ow (r.) ow a, a

Vl i L c cl lx (s.), (r.), (pl.) sbn, c, a, a, s, t,pgm, s*

Vl i L p clb (r.) p clbell c, pgm,c x

al il, i. m (s. s.) m rl Z

X c c (K mlll) K mlll (s.), (r.), (pl.) t c, Z, c, i, s*

X nkl c sb (s.), (pl.) sb n-c, c, a, a, pgm

Mno

hB ml i. fl fl (s.), (r.) fl fl Z, c, c

Vl i L mb (s.), (r.) t n, c x, pm

al

s il c/gl nklc s.a. (t cbl r c i.)

t cbl rc i. (r.) f skw

n, c, c l, l

bh colm

t ck m L/sjz mlr i. (ek) ek (pl.) f Lk m x

r t al i. K (s.) K al

mlx p L. r (s. s.) Bb rl pb

tk c L tl (s.), (r.), (pl.) tl Z, pb, B, c, i, g, pm, s*

(Sm.) Smelter (Ref.) Refinery (Sec. Sm.) Secondary smelter (Pl.) Plant (Con. Fac) Conversion facility S* Sulphuric acid1 In operation as of December 31, 2009.Source: Natural Resources Canada, Map 900A.


27/11225

Mineral ProcessingCanada has a significant mineral-processing

industry, with 33 nonferrous metal smelters and

refineries operating in six provinces (Figure 10).

Some of these facilities contain both a smelter

and a refinery.

British Columbia2 smelters,

1 smelter/refinery, 1 processing plantAlberta1 refinery

Manitoba2 smelter/refineries

Ontario2 smelters, 3 refineries,

3 smelter/refineries, 1 conversion facility

Quebec12 smelters, 3 refineries,

1 smelter/refinery

New Brunswick1 smelter

In the past, Canadas integrated smelters and

refineries have typically accompanied develop-

ment of a world-class mine and have been

located inland without access to low-cost marinetransport. As local ore reserves are depleted and

production of base-metal concentrate declines,

Canadas smelters and refineries are moving from integrated production toward

more costly custom treatment of concentrates from other nations. Another trend

is a movement toward using more secondary raw materials and scrap feed.

With the depletion of proven ore reserves across Canada (discussed in greater detail

in Section 3.0) and our increased dependency on imported concentrates, the quantity

and value of refined metal production has been irregular in recent years. Canadian

production volumes of refined lead and aluminum have remained steady over the past

five years, while those of copper and zinc have declined (Figure 11). Refined nickelproduction increased during the 20062008 period with the opening of the Voiseys

Bay mine, though declined in 2009 as a major strike at Vale Inco took effect.

The ability to source raw material supplies from domestic mines remains an

important influence on costs and hence on the profitability of Canadian refining

and smelting operations. Exploration and domestic production are vital to obtaining

reliable feedstock and to maintaining the competitiveness of the Canadian mineral

processing industryparticularly in an age when China and other countries are

expanding their processing capacity and competing fiercely for global raw material

supplies. The age of some Canadian processing operations, combined with their

ability to meet emerging regulatory requirements, also impacts their viability. For

example, HudBay Minerals recently announced that it would be closing its 80-year-old copper smelter in Manitoba in mid-2010.

Figure 11: Canadian Production of Selected Refined Metals, 20042009

(tONNes) 2004 2005 2006 2007 2008 2009

al 2,592,160 2,894,204 3,051,128 3,082,625 3,120,148 3,030,269

c 1,880 1,727 2,090 1,388 1,409 1,299

cbl 4,673 4,618 4,555 4,883 4,899 4,358

c 526,955 515,223 500,463 453,453 442,050 335,052

L 241,169 230,237 250,464 236,688 259,094 258,940nkl 151,518 139,683 153,743 162,646 167,732 113,067

Z 805,438 724,035 824,464 802,103 764,310 685,504

Sources: Natural Resources Canada; Statistics Canada Catalogue No. 26-202-X.


28/11226

export products so they can be containerized. Some agri-food products are now

being shipped in containers rather than in bulk and a similar trend may develop in

the mining sector.

The level of freight volumes carried by the global transportation system is signifi-

cantly affected by the world market price of oil. For example, as noted by economist

Jeff Rubin, the cost of shipping a container from Shanghai increased from $2,000

to $8,000 over the past eight years and would rise to $15,000 were oil to reach $200

per barrel, thereby diminishing the business case driving investment in China. Whilethese rates have declined since the recession, if oil prices increase from present rates

in the coming years, this variable has the potential to dramatically change investment

and global shipping patterns for mining and other industry sectors.

rl

In its 2009 Transportation in Canada publication, Transport Canada reports that the

minerals and metals sector (coal, fertilizer, iron ore, ores and metals) accounted

for 44% of the 236 million tonnes in commodity volumes carried by railroads in

Canada in 2009. Among the next largest segments, grain accounted for 15%, forest

products for 14% and chemicals for 6% of this volume. According to Statistics

Canada, shipments of coal and processed minerals transported by Canadian

railways represent approximately 50% of total rail revenue freight (Figure 12).

Transportation ActivitiesCanadas transportation system is critically

important to facilitating the flow of mined and

refined products to markets in Canada and

abroad. The Canadian mining industry is, by

some measures, the single most important cus-

tomer for the transportation sector. Minerals and

fabricated mineral products provide significant

tonnage for Canadas transportation system,particularly bulk commodities such as iron ore,

coal, potash and sulphur.

In parallel with the emergence of globalization

in recent decades, global shipping has become

dominated by container traffic given the related

ease of handling and transfer between rail, truck

and marine modes of transportation. Canadas

large import volumes from Asia (furniture,

electronics, clothing and building products

via container) has created a surplus situation

where imported containers are relatively full ofproducts while those leaving Canada are not,

which has led to an ongoing effort to adapt

Figure 12: Minerals and Mineral Products Transported by Canadian Railways, 20022009

(MiLLiON tONNes) 2002 2003 2004 2005 2006 2007 2008 2009

tl v 1 238.7 235.1 251.2 260.7 258.7 255.7 244.4 212.9

tl l 108.0 107.1 106.9 112.8 108.0 112.0 111.9 85.0

tl l 24.8 23.3 27.2 27.3 27.9 27.7 27.6 21.7

tl l 132.8 130.3 134.0 140.0 135.9 139.8 139.4 106.7

(%)

c l l v 55.6 55.4 53.4 53.7 52.5 54.7 57.1 50.1

1 Revenue freight refers to a local or interline shipment from which earnings accrue to a carrier.Source: Statistics Canada, Catalogue No. 52-001-XIE.


29/11227

The Canadian freight rail system operates as a

dual monopoly shared by Canadian National

and Canadian Pacific. In many instances,

communities are served by only one company,

thereby offering shippers little competitive

choice. The strike of CN rail conductors in

2007 illustrated the importance of the freight

rail system: after less than one week of the

strike, Canadian mine sites and processing opera-tions were significantly affected in their ability to

move raw materials in and finished products out

to customers.

In 2007, the federal government tabled changes

to the Canada Transportation Actaimed at strength-

ening provisions that protect rail shippers from

the potential abuse of market power by railways.

The changes were supported by MAC and the

Canadian mining industry, and became law

in February 2008. They helped improve the

competitive balance between the interests ofshippers (lower rates, better service) and those

of rail companies (higher rates and profitability)

by strengthening the ability to arbitrate disputes

over rail fees and ancillary charges.

As a follow-up to these legislative changes, the

federal government is undertaking a review of

railway service levels. The intent of the review is

to assess service by CN and CP, identify prob-

lems, examine best practices, and recommend

commercial, regulatory or other remedies that

would improve levels of service. A key messageconveyed by MAC and other shipper stakehold-

ers during the review is that railways should face

the same kind of penalties and disciplines on

their service performance as shippers already do.

Four important consulting studies conducted as

part of the review were released in March 2010


30/11228

tHe MiNiNgiNDustry is, b

, l c. ml b l v ,ll blk , l,, l.

0.5% of total truck exports and 0.1% of imports.

There is no comparable information of sufficient

detail to describe domestic truck shipments

by commodity.

Mn

The federal governments annual Transportation

in Canada report lists total Canadian industrial

exports sent via marine transport to the U.S. at$26 billion in 2008, most of this being gasoline

and crude petroleum. Marine imports from the

U.S. are relatively smalltotalling $8 billion

and comprise mainly gasoline, coal and iron ore.

In the mining sphere, Canada exported around

$700 million worth of iron ore and $300 million

in non-ferrous products and alloys via ship to the

U.S., while importing $1 billion in coal and $900

million worth of iron ore.

Canadian industrial exports by ship to overseas

(non-U.S.) countries totalled $70 billion in 2008,led by grains and food, metals and alloys, and

coal. Imports totalled $71 billion, led by crude

oil, automobiles, machinery and electronics. In

mining, Canada exported a significant value

of non-ferrous products and alloys ($8 billion),

potash ($3 billion), non-ferrous metals ($2 billion)

and iron ore ($2 billion) via ship, while significant

imports were seen only in non-ferrous products

and alloys ($2 billion).

The mining sector is an important contributor

to the business volumes of the St. LawrenceSeaway. According to the Seaway Corporations

annual traffic report, shipments of iron ore, coke

and coal represented 37% of total Seaway traffic

in 2009, while other mine products (mainly salt)

contributed a further 14%.

for the consideration of an expert advisory panel

that was itself established in September 2009.

It is expected that the panel will conclude this

review in late 2010.

Important Canadian mining companies such

as Teck Resources have also submitted views to

this process, highlighting the negative impacts

that poor rail service or non-competitive ratescan have on the viability of Canadian mining

operations. Industry submissions are urging the

advisory panel to seek greater rail competition

through its ministerial recommendations, as this

would lead to higher levels of service and lower

freight rates.

Some mining companies are also involved in

periodic dialogue with the government regarding

the Transportation of Dangerous Goods legislation

and processes, in the aim of ensuring that these

products can be moved safely and efficiently intoand out of mining facilities.

tkn

Automobiles and parts, machinery and

equipment, base metals and related articles,

plastics and chemicals, and agri-food products

represent the largest volumes of products

shipped internationally by truck. As detailed

in Transportation in Canada, trucks carried

$137 billion worth of Canadian exports in 2008

(down 20% from the previous year, reflecting the

recession), of which $13 billion or 9.3% was basemetals and articles of base metal. Of the $193

billion in imports shipped by truck, $15 billion

(7.7%) was base metals and articles of base

metal. Only small quantities of minerals, ores

and concentrates are traded by truckaround


31/11229

copper/zinc smelting and refining facilities in the region. At the Port of Vancouver,

coal accounts for 22% of the total volume handled by the port, fertilizer for 10%,

and metals and minerals for an additional 11%.

a

The high value and low volume characteristics of gold and precious metals are

relevant to the air cargo industry. According to the Transportation in Canada report,

Canada exported $40 billion worth of products by air in 2009, of which fully $9

billion was gold and precious metals; Canada imported $54 billion in productsvia air in 2009, of which $7.5 billion was gold and precious metals. Of all traded

products, only the machinery sector was a larger user of air transportation. The

other important mining product shipped via air was base metals, where exports

totalled $0.5 billion and imports $1 billion.

The mining sector is also an important customer

at Canadian ports, accounting for an estimated

two-thirds of commercial volumes. Of the four

primary marine shipping regions in Canada,

mineral products are most important in the St.

Lawrence and Great Lakes regions and least

important in the Atlantic region. Coal is particu-

larly important in the Pacific region as shipments

move to Japan and other Asian markets. ThePort of Montreal handles important volumes of

iron ore, copper ore, gypsum and zinc ore, gener-

ally as inbound cargo arriving via ship and being

transferred to rail or truck for distribution to the


32/11230

This section discusses the five principal financial

and monetary aspects of the Canadian miningindustrynamely reserves, prices, financ-

ing, exploration and capital investment. The

combination of accessible mineral reserves and

global prices for these minerals allows companies

the opportunity to be profitable and broaden

Canadian benefits. The availability of financing

is necessary for companies to fund their explora-

tion, resource appraisal and mine development

programs. Capital investment in mines and

processing facilities allows these minerals to be

extracted and converted into valuable products.

Canadian ReservesAs shown in Figure 13 and detailed in Annex 6,

there has been a significant decline in proven

and probable Canadian mineral reserves over

the past 25 years in all major base metals.

The most dramatic decline over the past

quarter-centuryover 80%was seen in lead,

zinc and silver reserves, while copper and nickel

declined by over half. Gold reserves in 2008 are

around 50% of their 1995 levels. It is evident

that without sustained and effective exploration,Canadian mineral production will outstrip

reserve additions, our smelters and refiners will

be forced to rely increasingly on imported raw

materials, and Canadas mining industry will be

at serious competitive and strategic risk.

On the positive side, exploration investment

reached historically high levels in Canada untilthe recent downturn, and Canada remains the

worlds top destination for mineral exploration.

Consistent investment over an extended period,

combined with the development of modern

geological mapping data, has the potential to add

significantly to Canadas proven and probable

reserves. As discussed earlier, the Government

of Canada should aim to continuously improve

the policy environment that fosters exploration

spending and a strong, dynamic mining industry.

There are some tax measures that could be

considered toward this end.

Global Metal PricesGlobal economic events and trends have a direct

and daily impact on mineral and metal prices.

As price takers in the international marketplace,

the Canadian mining industry is accustomed to

fluctuations driven by world economic conditions

and varying prices on terminal exchanges such as

the London Metal Exchange.

In some respects, the global industry is still recov-

ering from low prices and low exploration in themid-to-late 1990s, when investors pursued better

returns in the information technology, telecom,

biotechnology and pharmaceutical sectors. In

Canada, mineral exploration expenditures were

depressed throughout the 1990s and bottomed

sect ion 3 .0

tHe MONey: reserves,prices, fiNaNciNg,

eXpLOratiON aNDiNvestMeNt

iN tHe MeDiuM

terM, l blv b vl c, u.s. ll, W,l w j wlwwll l l.


33/112


34/11232

During the global recession beginning in the third quarter of 2008, many mining

companies curtailed production in order to bring supply into balance with demand.

For example, some 20 zinc smelters worldwide moved in late 2008 and early 2009 to

curtail production. In Canada, some 32 mining operations closed or saw temporary

production cuts during these months. The economic recovery since mid-2009 has

been driven largely by Chinese demand. Recovery in the U.S. and the European

Union remains sluggish through mid-2010, with the result that global companies in

numerous sectors (autos, pharmaceuticals, electronics, lumber, minerals) are deriving

increasing shares of profitability from Chinese sales.

The information in Figure 14 illustrates three stories: the strong mineral price

growth seen during the 20002007 period, the dramatic decline seen in late 2008in most metals, and the fact that prices of zinc, nickel and copper rebounded

through 2009 and the first half of 2010. Some interesting commodity-specific price

observations include the following:

out in 2000. While prices and exploration levels

grew strongly from 2002 to 2007, Canada

continues to face a mineral reserves crisis.

The Canadian industry responds to prices driven

largely by the strength of the United States and

Chinese economies. China imports over $100

billion in metals annually and presently buys

some 30% of the worlds base metals versus a

5% share in the 1980s. China also stockpiles

significant amounts of iron ore, aluminum,

copper, nickel, tin, zinc and oil at strategicmoments of low pricea practice that makes

it more difficult for analysts to project future

mineral prices and marine shipping prices.

Figure 13: Canadian Reserves of Selected Metals, 19802008

yearcOpper

(000 t)NicKeL(000 t)

LeaD(000 t)

ZiNc(000 t)

MOLybDeNuM(000 t)

siLver(t)

gOLD(t)

1980 16,714 8,348 9,637 27,742 551 33,804 826

1985 14,201 7,041 8,503 24,553 331 29,442 1,373

1990 11,261 5,776 5,643 17,847 198 20,102 1,542

1995 9,250 5,832 3,660 14,712 129 19,073 1,540

2000 7,419 4,782 1,315 8,876 97 13,919 1,142

2003 6,037 4,303 749 6,251 78 9,245 1,009

2004 5,546 3,846 667 5,299 80 6,568 801

2005 6,589 3,960 552 5,063 95 6,684 965

2006 6,923 3,940 737 6,055 101 6,873 1,032

2007 7,565 3,778 682 5,984 213 6,588 987

2008 7,456 3,605 636 5,005 222 5,665 947

Note: One tonne (t) = 1.1023113 short tons = 32 150.746 troy oz.Source: Natural Resources Canada, based on company reports and the federal-provincial/territorial survey of mines and concentrators.


35/11233

Although some 80% of demand relates to

jewellery, gold also serves as a store of wealth

and prices are largely driven by geo-political

uncertainties such as the mounting U.S. fiscal

and trade deficits, the debt and Euro crisis facing

some EU countries, and the evolving situation in

Iran and Iraq. The price of gold is at its highest

level since the early 1980s and continued to

increase during the 2009 recession, exceedingUS$1200 an ounce at time of writing. As noted

in an April 2010 edition ofMining Journal, gold

demand from China, the worlds second-largest

market, has increased by 13% annually over the

past five years and is expected to double in the

Figure 14: Metal Prices, 2000July 2010

MiNeraL prices 2000 2007 2008 2009 2010/07

al (us$/lb) 0.70 1.20 0.79 0.76 0.89

c (us$/lb) 0.82 3.23 1.28 2.34 2.99

Z (us$/lb) 0.51 1.47 0.49 0.75 0.80

nkl (us$/lb) 3.92 16.88 4.38 6.50 9.04

u (us$/lb) 8.29 98.81 53.00 47.00 41.75

gl (us$/z) 279 697 836 973 1,234

c l (us$/bl) 30 72 100 62 76

Note: Average yearly prices as well as actual price as of July 2010.Source: Scotiabank Commodity Price Index.


36/11234

In the medium term, most mining analysts

believe that a combination of continued develop-

ment in China, a depreciated U.S. dollar, aging

Western infrastructure, industry consolidation

and a dearth of new mining projects worldwide

will create strong mineral price fundamentals.

With the more gradual emergence of India and

its related demand for minerals and metals

perhaps over time on a scale comparable toChinathe mining industry may enjoy an

extended boom in the commodity price cycle.

Another predictor of an extended boom is that

while China is now the worlds largest consumer

of all major metals, its metal consumption per

person is still low in comparison with developed

Asian and Western economies. For example,

while some 1,200 cars are being added to the

streets of Beijing every day, Chinese consumers

still have only an estimated 10 cars per 100

people, versus around 76 cars in the U.S. Thoughnot a definitive benchmark of national economic

development and while such gaps may never be

totally closed, similar discrepancies nonetheless

exist in many metals-intensive areas.

The challenge of bringing new discoveries into

commercial production is another variable that

may support high mineral prices in the medium

and longer term. Underinvestment in new cop-

per mine capacity during the price downturn of

the 1990s, for example, means that refined sup-

plies are likely insufficient to meet future globaldemand. In a recent address, Anglo Americans

CEO estimated that 20 new world-scale copper

mines would be needed to meet projected global

demandthere are four mines of this scale in

operation today.

coming decade. In line with supply constraints,

some analysts have actually forecast prices that

could reach $5,000$10,000 per ounce over the

next decade.

Copper remains a bellwether commodity

with demand tied closely to economic growth

and consumption of wire, computer chips,

electronics and vehicles. Copper is attracting

particular attention from analysts, particularlyregarding whether the price increases seen

through 2009 are sustainable. Prices have

continued to increase through mid-2010 to

US$3 per pound, and metals consultancy

GFMS projects that prices could exceed US$4

toward end-2010 as production has difficulty

keeping up with consumption.

Spot prices for uranium reached US$99 per

pound in 2007 (from US$8 in 2000), driven

by increasing global demand and production

difficulties in Australia. Prices declined during the

first half of 2008 though have since settled ataround US$42, five times higher than a decade

ago. The enduring strength of the uranium

price has served to intensify exploration interest

in Saskatchewan and other regions, including

Argentina and Peru.

Iron ore prices tend to be set through contrac-

tual agreements between lead suppliers and

customers, rather than through global trading.

Spot pricing has become more prevalent in

recent months, to the point where it has largely

replaced the annual benchmarking price

system. Such a shift brings greater transparencywhile being more aligned with a steel system

where prices are set daily. The long delays in

2009 in reaching benchmark price agreement

between Rio Tinto, BHP Billiton, Vale and

Chinese steel companies reinforced the shift

to spot price markets.

caNaDiaN firMs bl

l xl c, u s, La, cla, e, l,a.


37/11235

The TSX is also home to the Venture Exchange, the former Canadian Venture

Exchange purchased by TSX in 2001, headquartered in Calgary with offices in

Toronto, Winnipeg, Vancouver and Montreal. The TSX Venture Exchange provides

emerging companies with efficient access to capital while offering investors a

regulated market for making venture investments. The 1,103 mining issuers listed on

the Venture Exchange in 2009 were valued at $20 billionover double the market

value of one year earlierand they raised around $3 billion in equity capital in

2009. Gold, potash, uranium, copper, silver, nickel, iron ore, coal and diamonds

were the main targets of TSX mining issuers.

Among senior companies, there are 331 mining issuers listed on the Toronto Stock

Exchange, valued at $347 billion; these companies raised $19 billion in 2009. Twenty-two

TSX-listed mining companies have a market capitalization exceeding $1 billion as of

2009, with Barrick Gold Corporation, Potash Corporation, Goldcorp, Teck Resources,

Kinross Gold, Cameco Corporation and Agrium each valued at over $10 billion.

innonl p

The global mining industry completed 2,327 public financings in 2009, raising

$65.9 billion in equity. As detailed in Figure 15, over a five-year period, around 82%

of these financings have been undertaken on the TSX, followed by the Australian

and London exchanges handling around 9% and 8%, respectively; by value, the

Figure 15: Global Mining Financings, 20052009

(vaLue iN us$ biLLiON)

eXcHaNge fiNaNciNgs % vaLue %

tsX t 8,316 82 64 32

Lse-aim L 774 8 50 25

asX al 924 9 28 14

nyse nw yk 24 14 7

hKex h K 11 12 6

BoVespa Bzl s pl 1 12 6

s 3 10 5

Jse J 10 2 1

o 109 1 8 4

tol 10,172 100 200 100

Source: Gamah International, 20052009, compiled by TMX Group.

According to Scotiabanks commodity research

analysts, other supply-side factors that could

affect future mineral prices include growing

resource nationalization in Latin America and

moves by many governments to increase royalty

rates. This issue is discussed in greater detail in

Section 6.0.

FinancingThe development and implementation of a

successful exploration and capital investment

program depends on a companys ability to raise

capital. Historically, Canada has had a strong

global presence in mining finance. Canadian

firms are responsible for the largest share of

exploration spending in Canada, the U.S., Latin

America, Central America, Europe and, most

recently, Africa. This exploration strength,

combined with the ability to turn properties

into mining projects, has helped make Canada

a world centre for mining finance.

cndn fnn

The Toronto Stock Exchange is home to the

largest group of mining companies in the world.

As of end-2009, the TSX listed 59% of the

worlds public mining companies with 1,434

facts and figures 2010 english

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